Supreme Court, RBL Bank, Vishwavir Ahuja, Micro Finance, net interest income, NPA, NII

RBL Bank

has portrayed cautious optimism after a difficult year in which the Covid 19 pandemic not only pushed back recovery but also resulted in new challenges particularly in the bank’s unsecured retail lending book.

“We remain watchful, conservative and yet agile. We will look scale up in segments in which we have domain expertise like micro finance and credit cards and also expand in secured businesses like housing finance, tractor and two wheeler loans,” CEO Vishwavir Ahuja said even as the bank stepped up provisions to cover from stress emerging from its unsecured credit cards, micro finance loans and loans to small enterprises which have all been hit by the devastation on livelihood caused by the Covid 19 pandemic.

The bank’s net profit fell 34% year on year due to a fall in net interest income (NII) due to reversals in interest income after the Supreme Court ordered banks to refund compounded interest on loans during the first six months of the fiscal year.

NII or the difference between interest earned on loans and that paid on deposits fell 11% to Rs 906 cr in the quarter ended March 2021 from Rs 1021 cr a year earlier as the bank had to reverse Rs 85 crore in interest income during the quarter. As a result net profit fell to Rs 75 crore from Rs 114 crore a year earlier.

A rise in provisions for stressed loans especially from the retail book also hit net profit. Provisions rose 27% to Rs 766 crore from Rs 601 crore a year ago and was higher than the 610 crore reported in the quarter ended December 2020 as the bank stepped up buffers to deal with the likely impact of the economic disruption caused by the second wave of the Covid pandemic.

“We have taken accelerated provisions for unsecured loans like credit cards, micro finance and loans to enterprises and increased our coverage to 50% of these loans which are due for more than 180 days compared to 25% we used to do earlier,” CEO Ahuja said.

More than 80% of the slippages that the bank saw during the quarter were from retail loans which are mostly unsecured. Retail loans however, remained the growth engine for the bank, growing 13% year on year even as corporate loans shrunk 11%.

Higher fee income helped the bank during the quarter. Total non interest income increased 37% to Rs 688 crore in March 2021 from Rs 501 crore a year earlier mainly due to income earned from credit card fees.

Net interest margin or the yield earned by the bank on loans and interest it paid on deposits fell to 4.17% in March 2021 from 4.93% a year earlier as interest reversals and cost of holding more than adequate liquidity buffers hurt.

Ahuja said that the bank is now more and more comfident of its corporate book as it is “right sized and adequately provided” with close to 80% of loans to companies rated A- and above.

“We have seen a 4% growth in the corporate book versus December. This book has been degrowing since December 2019 and now we think it will grow. While we didnt expect the impact of the pandemic to be so severe a year ago, we have fortified out balance sheet and are closely monitoring the second wave,” Ahuja said.

Gross NPAs increased to 4.34% in March 2021 from 3.62% a year ago. Though lower than the 4.57% performa gross NPA reported in December 2020.

RBL Bank has restructured loans of 56,113 accounts totalling Rs 467 crore for which it provided Rs 102 crore.


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